US v. Fleetwood Enterprises, Inc.

• Court: United States District Courts. 3th Circuit. United States District Court (Delaware)
• Citation: 702 F. Supp. 1082
• Docket Number: Civ. A. No. 88-68-JLL.
• Parties: UNITED STATES of America, Plaintiff, v. FLEETWOOD ENTERPRISES, INC., Defendant.
• Decision Date: 14 December 1988

702 F. Supp. 1082

UNITED STATES of America, Plaintiff,
v.
FLEETWOOD ENTERPRISES, INC., Defendant.

Civ. A. No. 88-68-JLL.

United States District Court, D. Delaware.

December 14, 1988.

702 F. Supp. 1083

William C. Carpenter, Jr., U.S. Atty., and Kent A. Jordan, Asst. U.S. Atty., Wilmington, Del., and John R. Bolton, Asst. Atty. Gen., Surrell Brady and Richard C. Stearns, Attys., Civ. Div., Dept. of Justice, Washington, D.C., Peter S. Race and Peter B. Rustin, Dept. of Housing and Urban Development, Washington, D.C., of counsel, for plaintiff.

Richard K. Herrmann of Bayard, Handelman & Murdoch, Wilmington, Del., Lawrence F. Henneberger, Salvatore A. Romano, and Randall J. Boe of Arent, Fox, Kintner, Plotkin & Kahn, Washington, D.C., and Richard Chernick and Steven E. Sletten of Gibson, Dunn & Crutcher, Los Angeles, Cal., and William H. Lear, Vice President-General Counsel, Fleetwood Enterprises, Inc., Riverside, Cal., of counsel, for defendant.

MEMORANDUM OPINION

LATCHUM, Senior District Judge.

The United States ("Plaintiff") filed this action to recover civil penalties from Fleetwood

702 F. Supp. 1084

Enterprises, Inc. ("Fleetwood"), for alleged violations of the National Manufactured Housing Construction and Safety Standards Act of 1974 (the "Act"), 42 U.S. C. § 5401 et seq. (See Docket Item ("D.I.") 1.) There are four motions presently before the Court. Fleetwood has moved for leave of the Court to amend its answer, for the Court to allow discovery in connection with a defense it seeks to add by the amendment, and for the Court to compel other discovery. Plaintiff has moved for a protective order covering information which is also the subject of Fleetwood's motion to compel. For the reasons set forth below, Fleetwood's motions to amend and to allow discovery will be denied. Fleetwood's motion to compel will be denied in part and granted in part, thereby rendering Plaintiff's motion moot

I. BACKGROUND

Plaintiff filed this action on February 10, 1988, alleging that Fleetwood manufactured and offered for sale or sold nearly 20,000 homes which did not comply with the construction and safety standards issued under the Act by the Secretary of Housing and Urban Development ("HUD"). (D.I. 1.)¹ Fleetwood filed its answer on March 3, 1988, in which it asserted seven affirmative defenses challenging the action on various grounds ranging from the statute of limitations to the constitutionality of the construction and safety standards.²

On August 3, 1988, this Court issued a scheduling order under Rule 16, Fed.R. Civ.P., requiring, inter alia, the parties to this action to file any motion to amend any pleading on or before August 15, 1988. (D.I. 45.) On August 15, 1988, Fleetwood filed one of the motions presently before the Court. (D.I. 46.) The motion seeks leave of the Court to amend the answer adding six affirmative defenses which challenge the construction and safety standards and allege Plaintiff brought this action against Fleetwood selectively and for an improper motive. See Section II infra.³

Thereafter, two more motions were filed by Fleetwood and one by Plaintiff regarding discovery in this case. On October 26, 1988, Fleetwood filed two motions. One motion requests the Court to allow discovery in connection with a defense that is the subject of its motion to amend. (D.I. 60.) The other seeks to compel Plaintiff to "completely" respond to discovery requests made by Fleetwood in May and June of 1988. (D.I. 62.) In response, on November 8, 1988, Plaintiff moved for entry of a protective order covering discovery which is also the subject of Fleetwood's motion to compel. (D.I. 64.)

Thus, a total of four motions, three by Fleetwood and one by Plaintiff, are presently before the Court. After considering the arguments contained in the voluminous written submissions of the parties, oral argument on November 21, 1988, and the post-oral argument submitted by Fleetwood,⁴ the Court's opinion with respect to each of the four motions follows.

II. FLEETWOOD'S MOTION FOR LEAVE TO AMEND ITS ANSWER

Fleetwood seeks leave of the Court to amend its answer under Rule 15(a), Fed.R.

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Civ.P., to add six additional affirmative defenses. (D.I. 46.)⁵ The defenses assert that

Each of the regulations and interpretative bulletins that form the basis of the complaint is arbitrary, capricious, an abuse of discretion, and contrary to law. (D.I. 46 Ex. A at 7) the "Eighth Defense".

Each of the regulations and interpretative bulletins that form the basis of the complaint is contrary to and inconsistent with the enabling legislation. (Id. at 8) the "Ninth Defense."

The administrative record in support of each of the regulations and interpretative bulletins forming the basis of the complaint is inadequate. (Id. at 8) the "Tenth Defense."

Each of the regulations and interpretative bulletins that form the basis of the complaint is not supported by substantial evidence. (Id. at 8) the "Eleventh Defense."

Each of the regulations and interpretative bulletins that form the basis of the complaint was promulgated in violation of proper procedure. (Id. at 8) the "Twelfth Defense."

This proceeding was instituted against defendant selectively and for an improper motive. (Id. at 8-9) the "Thirteenth Defense."

Allowance of leave to amend under Rule 15(a) is within the sound discretion of this Court. Zenith Radio Corp. v. Hazeltine Research, 401 U.S. 321, 330, 91 S.Ct. 795, 802, 28 L.Ed.2d 77 (1971); Lewis v. Curtis, 671 F.2d 779, 783 (3d Cir.), cert. denied, 459 U.S. 880, 103 S.Ct. 176, 74 L.Ed.2d 144 (1982); Dixon v. Pennsylvania R.R., 67 F.R.D. 425, 428-29 (M.D.Pa.1975). However, Rule 15(a) requires that leave to amend be "freely given when justice so requires." Fed.R.Civ.P. 15(a).⁶

Plaintiff opposes Fleetwood's motion arguing that leave to amend should be denied because the defenses Fleetwood seeks to add will not withstand a motion to dismiss (D.I. 48 at 3), and that granting leave will prejudice Plaintiff and unduly delay this case. (D.I. 48 at 17-18.)

The Defenses Will Not Withstand A Motion To Dismiss

While this Court's discretion under Rule 15(a) is limited, see J. E. Mamiye & Sons, Inc. v. Fidelity Bank, 813 F.2d 610, 613 (3d Cir.1987), leave to amend may be denied where amendment would be futile because the defenses sought to be added are legally insufficient. See Massarsky v. General Motors Corp., 706 F.2d 111, 125 (3d Cir.), cert. denied, 464 U.S. 937, 104 S.Ct. 348, 78 L.Ed.2d 314 (1983); see also Outboard Marine Corp. v. Pezetel, 535 F.Supp. 248, 252 (D.Del.1982).⁷

The six defenses fit into two general categories, those that challenge the validity of the construction and safety standards and one that alleges selective enforcement of the Act. The two categories will be addressed separately below.

1. The Defenses Challenging Validity Of The Federal Standards

Plaintiff argues that the Eighth through the Twelfth Defenses challenge the validity of the construction and safety standards and that such challenges "may be brought only in the court of appeals pursuant to the statutory provision for judicial review, 42 U.S.C. § 5405(a)(1), and not in district court." (D.I. 48 at 3-4.) The

702 F. Supp. 1086

gravamen of this argument appears to be that this Court is without subject matter jurisdiction to consider challenges to the validity of the standards in this proceeding because the Act provides for judicial review of a standard by a court of appeals within 60 days of the standard's effective date.⁸

While there is a strong presumption in favor of finding that Congress intended judicial review of action taken by an administrative agency, see Bowen v. Michigan Academy, 476 U.S. 667, 670, 106 S.Ct. 2133, 2136, 90 L.Ed.2d 623 (1986); see also Abbott Laboratories v. Gardner, 387 U.S. 136, 140-41, 87 S.Ct. 1507, 1511-12, 18 L.Ed.2d 681 (1967), it is well established that "Congress, acting within its constitutional powers, may prescribe the procedures and conditions under which, and the Courts in which, such judicial review ... may be had." City of Tacoma v. Taxpayers of Tacoma, 357 U.S. 320, 336, 78 S.Ct. 1209, 1218, 2 L.Ed.2d 1345 (1958); Five Flags Pipe Line Co. v. Department of Transportation, 854 F.2d 1438, 1439 (D.C. Cir.1988); United Transportation Union v. Norfolk and Western R.R. Co., 822 F.2d 1114, 1119-20 (D.C.Cir.1987), cert. denied, ___ U.S. ___, 108 S.Ct. 700, 98 L.Ed.2d 651 (1988). Moreover, where a special procedure for judicial review is provided by an administrative agency's enabling legislation, "it is ordinarily supposed that Congress intended that procedure to be the exclusive means of obtaining judicial review in those cases to which it applies." City of Rochester v. Bond, 603 F.2d 927, 931 (D.C.Cir.1979); accord United Mine Workers v. Marshall, 667 F.2d 336, 340 (3d Cir.1981); see In re Establishment of Restland Memorial Park, 540 F.2d 626, 628 (3d Cir.1976); Getty Oil Co. v. Ruckelhaus, 467 F.2d 349, 356 (3d Cir.1972), cert. denied, 409 U.S. 1125, 93 S.Ct. 937, 35 L.Ed.2d 256 (1973); see also Whitney Nat. Bank v. Bank of New Orleans & Trust Co., 379 U.S. 411, 410, 85 S.Ct. 551, 553, 13 L.Ed.2d 386 (1965).

The Act provides such a procedure for judicial review. Section 5405(a)(1) provides in pertinent part that:

In a case of actual controversy as to the validity of any order under Section 5403 of ... the Act, which addresses the establishment, amendment or revocation of the construction and safety standards, any person who may be adversely affected by such order when it is effective may at any time prior to the sixtieth day after such order is issued file a petition with the United States court of appeals for the circuit wherein such person resides or has his principal place of business, for judicial review of such order in accordance with the provisions of sections 701 through 706 of the Administrative Procedure Act (the "APA").

42 U.S.C. § 5405(a)(1). The Court concludes that § 5405(a)(1)...